The 2013 Economic Reality Check

Governments can tell us they're destroying the value of our currencies while talking about these currencies rising in value.

Obviously, if new home starts were exceeding new home sales by a 2:1 margin every month, then:

a) Virtually all U.S. homebuilders would have already bankrupted themselves, because no business can remain solvent making twice as many units as they sell.

b) The inventories chart would be going straight up, not straight down.

Adding one final element of absurdity, we're told that the U.S. "housing recovery" has been gaining steam in recent months. In fact, all the propaganda machine has been doing is inventing even more fantasy housing starts as the ratio of "starts" to "sales" has now expanded to roughly 2.5:1.

The stench of surreality doesn't diminish when we turn to the subject of inflation. According to the U.S. propaganda machine, inflation isn't simply "low" in the U.S., it's practically non-existent . Yet, only six months ago, Asian governments convened an emergency summit to discuss the "global food-price crisis."

At approximately that same time, the World Bank warned global food prices were rising at an annualized rate of 120% . In that same month, the U.S. government was reporting 0% inflation in the U.S.

Is it possible that global food inflation could be exceeding a 100% rate while at that same moment "inflation" was 0% in the U.S.? We can answer that question with another question: Do Americans eat food?

Note that while the U.S. Inflation Lie is the most extreme, all Western governments claim to be in similar inflation-resistant, economic cocoons while inflation rages out of control across the rest of the world. Yet, the moment we cease to believe Western inflation lies then we really venture into the realm of economic quicksand, as many of our most important economic statistics are directly derived from these inflation numbers.

As regular readers know by now, every quarterly estimate of GDP must be fully "deflated" by the prevailing inflation rate; otherwise, mere changes in price become confused as "economic growth."

Put another way, if governments deliberately understate the rate of inflation then every point they understate inflation by can be (is) directly added to GDP.

Thus for any readers who still choose to reside in the real world and who know that our governments are understating inflation by a wide margin, we must all believe that Western GDP has been exaggerated to the upside by an identical margin.

Obviously we only need to subtract a few percentage points from Western GDP reports to turn all of the "weak recoveries" reported by these governments into continuing (and worsening) recessions. This means that we must (as a matter of arithmetic) be just as deeply skeptical of Western GDP statistics as we are of Western inflation numbers.

Of equal significance, "inflation" (i.e. rising prices) is nothing but an expression of the rate at which our (paper) currencies are plummeting in value. Indeed, in proclaiming "competitive devaluation" to be our official economic policy (i.e. racing to see which government can destroy the value of their currency fastest), our governments have explicitly confessed to unleashing crippling inflation upon the world.

Yet, in a world where all our governments have explicitly confessed to destroying their currencies (and creating inflation), not only do our lying governments refuse to acknowledge this self-created inflation, they even have the audacity to tell us from time to time that these plummeting currencies are "rising in value."

It would be a mistake, however, to view the U.S. as undisputed Champion of the Absurd when it comes to reporting on its economy. European governments have demonstrated they can peddle propaganda to their own populations just as ridiculous and implausible as the tripe gobbled up by American sheep.

By now, all but the most masochistic of readers would have been fed up reading of the efforts of European governments to "fight the debt-crisis." As with the U.S. housing sector, year after year we are assured on at least a quarterly basis that "this time" they finally have the problem under control.

How have European governments been "fighting" this debt-crisis? By lending more money to already insolvent economies .

For the really, really insolvent economies there is also austerity, where European governments slash the wrists of their economies with suicidal spending cuts to reduce the size of their deficits.

In fact, all of this austerity has only increased deficits still larger, and thus made their debt crises worse, not better .

What are we to make of this tidal wave of economic insanity, which has practically washed away any/all "sign posts" leading back to the real world? Don't worry. The propaganda machine has an answer for that too: It calls this "the new normal."

In the "new normal" housing-sector depressions can be turned into housing recoveries simply by fudging a couple of numbers.

In the "new normal" inflation can be conquered simply by closing one's eyes and pretending it doesn't exist, and by pretending that inflation doesn't exist we can also turn recessions/depressions into "economic recoveries."

In the "new normal" our governments can tell us out of one side of their mouths that they're destroying the value of our currencies with their competitive devaluation, while out of the other side of their mouths they talk about these currencies "rising in value."

In the "new normal" deadbeat debtors can be made solvent by lending them more money. If austerity has been proven to only cause economies to disintegrate at a faster rate, then the appropriate prescription is even more austerity.

Of course nothing about the "new normal" is newer than the phrase itself. We already had an old economic colloquialism that captures exactly the same concept:

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.